User talk:Dougtax

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Re: Practice Purchase

Hello Doug,

Hope everything is going well with you. My name is Ajay, I have a small part-time tax practice on the side last number of years and also works in the corporate accounting. I happen to read one your post on taxalamanac and noted that you have purchased a couple of practices previously.

I am planning to purchase a practice from a retiring CPA. He is been in practice over 35 years and about 25years in the same location. I am planning to buy his clients and building. The practice is averaging above $250k in all years (I reviewed his tax returns for last 10 years). He is in a retirement mode, so not really willing to take new clients. But some of his clients are old like him, but he told me that he always get a few good clients to replace those clients that are passed away or left for another state or something, and also I can get more clients just because he is been in the same location for a long time and did not actively pursue to get any new clients for many many years.

We have no broker, so it is a direct deal (the price we verbally agreed is $225k) less than 1x gross) but no willing to put any retention clause. He will work with me upto 9 months but the total hours included in the price is 200hrs. After that I have to pay him about $100/hr, if I need his service.

My questions are; what is the best way to retain the clients?

What percentage of clients might leave from your experience?

Is $225k is a fair price for this practice, based on gross of $255k, but also factoring some of the clients are old (business write-up and business tax portion $170k, individual $85k)?

I appreciate your thought and advice on this prchase. Thanks/Ajay

Sorry I didn't add my contact. You can reach me at: ajaycpa@gmail.com or on my cell (313)485-0555. Thanks and have a great day. Abstax 21:10, 22 June 2011 (UTC)

Doug, would love to talk with you about structure of buyout. This would be a sole member LLC selling to a sole member LLC. Five year earn out - 25% each year (long story). Question is - seller wants to report income as capital gain, buyer wants it to be ordinary income. How do people do this? There are no capital assets at this point - just the client list. Any help would be appreciated! Cindy (garnettec@verizon.net)

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